Cost And Management Accounting Practice In An Organization (A Case Study Of John Holt Nig. Ltd)

Project and Seminar Material for Accountancy / Accounting

Abstract

“Cost and Management Accounting practice in an Organization”, seeks to give the nature, scope, impact and practice of Cost and Management Accounting in an Organization. For the purpose of a vivid understanding, the researcher shall be giving a detailed explanation of cost accounting and management accounting separately, before combining cost and management accounting practice in an organization. Chapter one is focusing on the background of the study, statement of the problem, objective of the study, significant of the study, scope of the study, research question, and limitation of the study and definition of terms. Chapter starts with an introduction to the literature review, and then what is accounting, the meaning of cost accounting, the meaning of management accounting, cost and management accounting, accounting information etc. Chapter three deals generally on Research Methodology, population of study sample size, instrument for data collection etc. Chapter four purely deals on data analysis and interpretation with the findings. While Chapter five focuses on the summary of finding, conclusion and recommendation.

Chapter One

1.0 Introduction

1.1 Background of the Study

The purpose of this study is to explore Cost and Management Accounting Practices utilized by Organizations. The findings are expected to contribute to the existing literature about the subject, especially in developing markets.

At the heart of nations’ economic success or failure is the performance of individual businesses, which itself reflects the quality of decisions made by businessmen. To make decisions, businessmen require information, including accounting information. Despite the lack of detailed research into the accounting records of businesses, and how they were used to influence decision making, there has nevertheless grown up a conventional wisdom directed at the inadequacy of costing data for decision making, the non-adoption of best practice by businessmen, and the failure of accountants to provide the lead in the construction of costing systems.(Pollard 2001).

Recent archival-based research however has begun to loosen importance elements of this conventional wisdom, and the purpose of this project is to summarize its findings and to examine its implications for a broad-based assessment of the development of Cost and Management Accounting Practice in an Organization.

1.2 Statement of Problem

One of the most critical problems as regards to this study is that: is the available Accounting Information resulting from Cost and Management Accounting Practice so reliable in such a way that it will aid and facilitate decision making?

Another problem is that, there has been lack of detailed research into the accounting record of businesses and how they are used to control decision making, due to this, Accounting Information has lost their relevance on investor’s decisions and business Management decision making. Another reason for this is not far fetch; it is because of a past record of ineffectiveness of Accounting Information in Organization. There is inability of managers to embrace the new technology in Management Accounting Practice.

There is also the problem on the ground that some accountants as well as business firm still have not been able to adopt the best practice of Cost and Management accounting which could bring about enhancement in decision making.

1.3 Objective of the Study

The objective of this study is basically as follow:

To examine the relevance, nature, scope of Cost and Management Accounting Practice in an Organization. For a proper understanding and reasonable findings, the researcher made use of John Holt Nig. Ltd Benin City as a case study.
To assess the relevance and functions of Cost and Management Accounting Practice in Organizations and how it has helped in Organizational decision making.
To examine the new area in Management Accounting and how it affect decision making.

1.4 Research Hypothesis

Based on the foregoing, the following research hypotheses formulated will be empirically tested and result gotten will serve as a spring board for recommendations. The following are the hypothesis for the study:

Ho: Cost and Management Accounting Practice does not bring about reliable accounting information
Hi: Cost and Management Accounting Practice brings about reliable accounting information
Ho: Lack of detailed research into the accounting records of businesses does not affect decision making negatively
Hi: Lack of detailed research into the accounting records of businesses affects decision making negatively.

1.5 Significance of the Study

The researcher now discovered that it will be reasonable to encourage Organizations in Nigeria to introduce and adopt a proper and vital Cost and Management Accounting Practice into their accounting system so that the general public can have confidence in their accounting information, which will also help them in decision making.

This research work will be significantly useful to students of accounting and Management department as it will give a detailed explanation of the nature, scope and relevance of Cost and Management Accounting Practices in an Organization.

1.6 Limitation of the Study

During the conduct of this research work, some factors posed as constraints to the determined efforts of the research to carryout the research study to such a depth and in such a manner that it ought to have been carried out judging from its relevance to Management, such factors include:

a. Management Restriction:

Management more often than now allow access to information that are considered very confidential in nature like detail information of Organization of the Organizational corporate profile. As a result of the restrictions the researcher was able to work with only the information that was accessible.

b. Time Constraint:

Time is also another factor tat acts as hindrances in carrying out this research study. This is as a result of the fact that other things were still being attended to in the course of carrying out this research work.

c. Financial Constraint:

Money also acts as a problem in the conduct of the research work. Traveling expenses were incurred in getting the materials for the research work. Also incurred, were expenses for the typing and distribution, building and a lot of other expenses.

1.7 Scope of the Study

This project basically covers such area as cost accounting, Management accounting, Cost and Management accounting and their practices in an Organization, as well its relevance and usefulness in decision making. The area covered in the research work is limited to John Holt Nig. Ltd, Benin City which is used as a case study.

1.8 Definition of Terms

Cost:

Okoye, (2002) defined cost as the value of economic resources used in the production of goods and services. The art/science of determining the “economic resources used in the production process is called cost or cost accounting.

Cost accounting

In the view of (Bjarneau 2007) cost accounting is a method of accounting in which all costs incurred in carrying out an activity or accomplishing a purpose are collected, classified, and recorded.

Management Accounting

According to (Abdel Kader, et al (2008), Management Accounting is the process of preparing Management reports and accounts that provide financial information required by managers to make day-to-day and short-term decisions.

Accounting Information System

An accounting information system (AIS) is a system of collection, storage and processing of financial and accounting data that is used by decision makers.

Ethics

According to (Advance Learners Dictionary 6th Edition), Ethnic are rules, principles or order governing a profession.

Leader

(Advance Learners Dictionary 6th Edition), defined Leader as a person in authority (Head of a Country or Organization).

Management

According to (Peter Drucker 2004), Management is the art of running and controlling a business or similar Organization. (Fubara 1986) views Management as an activity carried on in an environment that comprise of resources in capital and human, having alternative uses.

Dishonesty

(Advance Learners Dictionary 6th Edition), the lack of trust and intending to deceive people.

Measure

(Advance Learners Dictionary 6th Edition), Measure are steps, methods etc. to control situation.

Chapter Five

Summary, Conclusion and Recommendation

5.1 Summary of Findings

The survey revealed the general Cost and Management Accounting Practices in Organizations operating in Nigeria. The findings are expected to contribute to the existing literature about the subject, especially in developing markets.

Economic success or failure depends on the performance of individual businesses, which itself reflects the quality of decisions made by businessmen. To make decisions, businessmen require information, including accounting information which can be obtained from Cost and Management Accounting Practice. Despite the lack of detailed research into the accounting records of businesses, and how they were used to influence decision making, there has yet grown up a conventional wisdom directed at the inadequacy of costing data for decision making, the non-adoption of best practice by businessmen, and the failure of accountants to provide the lead in the construction of costing systems.

5.2 Conclusion

Cost accounting as a type of accounting process that aims to capture a company’s costs of production by assessing the input costs of each step of production as well as fixed costs such as depreciation of capital equipment.
In contrast to financial accounting (which considers money as the measure of economic performance) cost accounting considers money as the economic factor of production.

Management accounting or Managerial accounting on the other hand is concerned with the provisions and use of accounting information by managers within Organizations, to provide them with the basis to make decisions that will allow them to be better equipped in their Management and control functions. Anton, (2006).

Cost accounting and Management accounting that combine (Cost and Management Accounting Practice) to provide managers with the accounting information required to help them conduct business operations in an efficient manner.

Parker (1999, p.47) and Anton, (2006).have pointed out that, in its modern meaning, that cost accounting is difficult to distinguish from Management accounting.

While Scapens (2001, P.10) has noted that “the terms cost accounting and Management accounting now tend to be used synonymously in textbook titles”. Such ambiguity is made worse by researchers examining the historical development of accounting who have adopted an even wider range of related terms, including Cost recording, Costing, cost accounting, and Management accounting, some of which have been used interchangeably and others in a specific, separate manner.

5.3 Recommendation

This study has endeavored to establish the value and relevance of Cost and Management Accounting Practice in an Organization. Therefore, investors react according to the aggregate of accounting information which published in financial statements. Accounting information has the ability to explain so many things about an Organization.

Based on this fact and findings my recommendations are as follows:

The Management of Organizations has to be diligent in adopting Cost and Management Accounting Practices to ensure accuracy in the accounting information.
There is need for managers in Organization to involve in the combination of cost accounting and Management accounting since the combination provide managers with the accounting information required to help them conduct business operations in an efficient manner.
There should be a detailed research into the accounting records of businesses, and how they were used to influence decision making. This will definitely enhance and facilitate decision making processes.
Also, awareness should be created on the relevance of Cost and Management Accounting Practice in Organizations.
Accounting and Management students should endeavor to go into research on Cost and Management Accounting Practice to enable them know the value and relevance of Cost and Management Accounting Practices.

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